Lending Institutions Providing Loans to Homebuyers cannot be Treated as Financial Creditors Under IBC: NCLAT [Read Order]

In a recent case, the Delhi bench of the National Company Law Appellate Tribunal ( NCLAT ) held that lending institutions providing loans to homebuyers do not qualify as ‘Financial Creditors’ under Insolvency and Bankruptcy, Code 2016 (‘IBC’).

Two flat buyers availed a loan from India Infoline Housing Finance Limited ( IIFL ), the Appellant for the purchase of flats in the Amadeus Residential Project developed by the Saha Infratech Pvt. Ltd, the Corporate Debtor in Sector 143, Noida. The NCLT Delhi admitted the Corporate Debtor into the Corporate Insolvency Resolution Process under Section 7 of the IBC. Mr. Shiv Nandan Sharma was appointed as the Resolution Professional (‘RP’).

The Appellant filed a claim of Rs. 2.31 crores on 17.08.2023, which was not admitted despite reminders. Consequently, the Appellant filed an interlocutory application with the Tribunal, seeking a directive for the RP to admit their claim. However, NCLT  dismissed the said application.

IIFL Home Finance Ltd, the Appellant filed the appeal against NCLT Order. The Appellant argued that the Order disregarded its lawful rights as a secured creditor since the homebuyers purchased the flats using the loan provided by the Appellant and mortgaged these units as security. Therefore, the Appellant is to be considered a secured creditor concerning the mortgaged flats and the claim must be admitted.

The Appellate Tribunal relied upon the Supreme Court’s decision in Pioneer Urban Land & Infrastructure Ltd. & Anr. vs. Union of India & Ors. Observed  that Home Buyers should be considered ‘Financial Creditors’ of the Corporate Debtor, regardless of whether they self-financed their flat or took a loan.

The coram comprising Justice Rakesh Kumar Jain (Judicial Member), Mr. Naresh Salecha, and Mr. Indevar Pandey (Technical Members) viewed that Banks or Financial Institutions that loan money to home buyers cannot be considered ‘Financial Creditors’ included in the CoC, as the liability to repay is on the individual homebuyers.

While dismissing the appeal, the NCLAT held that lending institutions providing loans to homebuyers do not qualify as ‘Financial Creditors’ under IBC.

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